Does the Expedia billboard effect still exist for hotels?

When four hotels in the JHM Hotels US chain appeared on the first page of destination results of Expedia, the giant online travel agency (OTA), they saw a rise in reservations through their own websites.

The hotels had between a 7.5% and 26% uplift in direct bookings as part of a so-called “billboard effect” — as if merely appearing on Expedia acted as a billboard for the properties in general.

This more substantial study looked at 1,720 reservations for InterContinental Hotel brands for the months of June, July, and August over three years (2008, 2009, and 2010).

In this case, for every commissionable hotel reservation that came through Expedia, there were between three and nine reservations at an IHG-related website that were influenced by the hotel having been listed on Expedia.

In the study, a large majority of customers that booked directly on a hotel brand website visited Expedia specifically beforehand.

When the study appeared, Expedia trumpeted the results. After all, the billboard effect suggested that its commission rates were better value than they might at first appear.

Listing a hotel on Expedia was doing double duty as a kind of search engine marketing tool for hotels’ own websites.

“Yes, it’s still relevant”

Anderson is not aware of any other billboard studies done since his. He said in an interview:

“Comscore and Compete quite often do attribution studies for individual firms, where they cookie customers and track ad effectiveness etc… So, somewhat similar, and broadly endorsing of my work.

I think what we are seeing is a lot of consolidation in many areas of online travel with the big players getting bigger – for example Travelocity is now basically an affiliate of Expedia, as Expedia powers its display.

So you have Expedia and Booking.com growing in brand awareness. These larger players (in the eyes of consumers) are the place to shop to find the best prices. As a result the billboard effect intensifies.”

“Not so fast”

While generally lauded for their good-faith thoroughness, the studies’ conclusions weren’t universally endorsed.

A key point: there was roughly as large of a billboard effect when hotels were presented on airline websites, rental car websites, and other sites as when they were displayed on Expedia.

That’s according to a 2011 review of the Comscore data used in the second billboard effect study by Cindy Estis Green, CEO at hospitality analytics consultancy Kalibri Labs. (The data was shared with her.)

In an interview, Green noted:

“A billboard effect appears to be enjoyed by other channels, too. Consumers may visit and value those sites more than OTAs. And those channels don’t charge commissions averaging 15% to 25%.”

Green elaborated on her interpretation in a free e-book that she co-authored with Mark V. LoManno, Distribution Channel Analysis: A Guide for Hotels, which was published by the HSMAI Foundation, the research arm of trade group Hospitality Sales and Marketing Association International.

It would have taken a broader, differently constructed study to sufficiently test all the variables involved in the complex issue of identifying and appropriately crediting each of the many touch points that lead to brand.com bookings.

A diminishing effect?

In 2014, the key question is if the billboard effect is still relevant. That question matters because hoteliers feel their spending on commissions has been outpacing their total revenue growth.

Moe Ibrahim, CEO at Journeyful, a US start-up with an online hotel booking platform for hotels aiming to cut middlemen out, has this to say:

“Perhaps the billboard effect theory held some weight in the early days of OTAs where the consumer might have preferred to book direct, but the reality is today, consumers do not want to book direct.

The consumer believes booking direct is expensive. William Shatner told them so. And sometimes, it’s true, because hotels are behind the technology curve and use the OTAs discounting tools wrongly.”

Max Starkov, head of HeBS Digital, a hotel marketing services provider, says he has never been a big believer in “the so-called billboard effect”.

Implying that a single touch point — namely, an OTA site — plays the most decisive role in influencing the hotel booking decision is simply ludicrous.

What about all the other super powerful touch points: TripAdvisor, social media, search engines?

The rise of metasearch is another factor, adds Flo Lugli, of the consultancy Navesink Advisory Group and formerly a marketing executive at Wyndham Hotels. She notes:

“With TripAdvisor adopting metasearch and Kayak growing rapidly, more and more consumers are starting their research with metasearch rather than an OTA.

So if the studies were redone today, I don’t know if it would point to the same conclusions.”

Robert Cole, who runs the RockCheetah consultancy, says the effect isn’t substantial enough to have prompted hotel owners to figure it into their channel management strategy.

“I haven’t run into any hotels that have really started to calculate out the margin the OTA is getting and factor a share of their direct bookings as some sort of media buy.”

Attribution gets harder in the mobile era

Anderson at Cornell wonders aloud about how mobile might change the billboard effect.

“As phone/tablet usage grows, we may see a different story.

Let’s say consumers switch to having higher conversion ratios on mobile devices. Then they probably won’t shop in an app and then call the hotel directly.

They will instead shop and purchase via the app. So the billboard effect may be reduced.”

Ibrahim agrees:

“Chances are users won’t download hotel apps because they’ll be too specific, unless. of course. the customer is chain loyal and it’s a chain app.

So, the trend of increased mobile bookings will benefit the OTA and metasearch apps.”

The mobile revolution also favors the intermediaries over suppliers, says Cheryl Rosner, past president of Hotels.com and current CEO of Stayful, an intermediary platform for bidding and booking boutique hotels in 10 US markets.

“This is a complex issue. But for mobile web, intermediaries have put a lot more thought into the user experience of the full booking process via “tap tap slide”, instead of by keyboard and mouse, than hotels have.

That design edge may reduce the temptation among users to click off to a direct site. So we may see the billboard effect diminishing.”

Expedia says billboard effect is growing

Adam Anderson, director of industry relations at Expedia, responded by e-mail to the above opinions:

“Attribution is difficult, but it’s very logical to see how exposure across multiple channels and places online can drive hotel-direct bookings.

Expedia, in particular, has grown its presence significantly since the billboard effect study was published, making the exposure that its partners receive even broader.

Expedia partners are featured in more than 150 brands in 70 countries, exposing partners through more than 140 mobile sites worldwide.

Further, the marketing efforts from these brands also exposes partners through other channels, including meta.

It’s reasonable to conclude that many shoppers will use these channels for inspiration, research and shopping and then book direct.​​

As an aside, Ms. Estes-Green’s point about exposure from airline websites, rental car websites, etc., being a cheaper alternative than an OTA is misleading.

Many or most of these sites are powered by OTAs through their affiliate programs, like Expedia’s — which has 10,000 partner sites.”

Defending the original research

The travel industry is notorious for publishing studies that are poorly done, failing to look at statistically representative sample sizes and rarely accounting for the various factors at play.

In that light, the Cornell studies are remarkable for having been carefully constructed. As Anderson notes:

“During the three-month period, the properties were cycled on and off the Expedia.com listings. That is, we displayed a particular hotel on Expedia and then did not display it there. Each hotel’s cycle lasted 7 to 11 days.

When properties were displayed on Expedia.com, they were displayed on the first results page. When a property cycled off, it could not be found anywhere on Expedia.com, even if someone specifically searched for it.

At the completion of the study each property had spent 40 days displayed on Expedia and 40 days not displayed.”

While no single study is perfect or definitive, the second Cornell study remains hard to punch holes through.

For instance, what about rate discounts?

Was it possible that the results were skewed, because when the hotels were on Expedia they were offering promotional rates, and that it was the promotional rates that was actually driving the bookings?

Anderson says no:

“As part of the study I also looked at average daily rates (ADRs).

The ADRs during the Expedia on phase – controlling for LOS, DOW etc… were slightly higher (as demand was higher).

What about seasonality? Might the results have been distorted by being, say, 40 days of local low season followed by 40 days during peak travel?

Again, Anderson says no.

I directly controlled for seasonality as I oscillated the weeks of ON and OFF, i.e. this week on, next week off, third week on, etc…

I did this for 12 weeks, I also ensured that I had same number of weekends, holidays etc… in each of the ON and OFF cycles.

A need for more independent research

Perhaps the biggest mystery left in the wake of Anderson’s work is the problem of how to attribute the cost of acquisition of a hotel customer. Jan Freitag, senior VP of global development for STR, notes:

“Users are searching across devices, and we don’t accurately map their behavior. No one, not even Google, knows how to track this and attribute properly yet. That’s somewhat amazing.”

Sean O’Neill is Editor-in-Chief of Tnooz.
Before joining us, Sean was the future of travel columnist at BBC Travel, senior editor of BudgetTravel.com, and an associate editor at Kiplinger’s. He now lives in New Jersey, after a four-year stint in London. Follow him on Twitter.

Comments

Interesting article! However about the hotel’s own website setting his own price lower than the OTA’s.. I thought most hotels were obliged not to set a price lower than the one offered by the OTA, by contract. Which draws many complaints from hotel owners.

The more I look into this study the more suspect it appears. The sample group appears too small to be statistically significant, there was no control group, and the methodology – switching hotels on and off Expedia – is so misguided I’m amazed it got off the drawing board. Who commissioned this? Please tell me at least Chris Anderson and Adam Anderson aren’t related…

Thanks Bob. Do you know how this worked then? Did JHM employ Chris to carry out the study? Was it JHM that delisted their properties on Expedia every other week and was Expedia involved in this research?

If it’s not clear what I’m getting at, this appears to be something of a self-serving exercise on behalf of Expedia so it would be useful to know whether they commissioned the research.

Hi Dorian,
I don’t know the answer to that question. Expedia would not have commissioned this. They would not have had this selective criteria in their methodology. Can’t wait to read the detailed findings.

“Cornell’s Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center’s corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices.” The list of the center’s affiliates at the time of included Expedia but also included a variety of other partners like Priceline, Travelport, Marriott, Hilton, Four Seasons, InterContinental Hotels Group, Sabre Hospitality Solutions, among others.

Well, a pretty difficult model to track. Personnally, i think there is a billboard effect, but as Thomas says, it seems obvious to me that the hotel needs to have a website that really “seduce” the user. This requires at least nice and large picture, smooth booking engine, a competitve rate. If the rates or the booking conditions are more attractive on OTA, why would the user be willing to book direct.
We have done some test ( not big enough to be published) but basically, it shows that when the rates are cheaper (than OTA) on the official website, it has quite a big impact on the volume of booking. However, it seems that sometimes, being just a little bit cheaper is not enough. So , travellers do compare and visit official website but if there is almost no gain with direct booking, some may prefer booking via the OTA they are used to.

I believe in the billboard effect but one have to make use of it.
It will be more efficient if property’s website have a significantly better offer than on the OTA, or if OTA have a significantly less interesting offer than property’s website. Just tease with photos on OTAs to push guests to view better ones on own website, give more details, and better offer/terms direct, improve conversion on property’s website… many ideas that will affect the efficiency of the billboard effect.
If the effect diminishes, it may be because OTAs have improved conversion and hotels have not improved theirs.
Just like some will stop distributing through OTAs, I believe there is a middle ground : be present but much less attractive offer than direct.

2) Priceline & Expedia are estimated to comprise 5% of Google’s total ad revenue – dwarfing the spend of the rest of the travel industry. (See http://skift.com/2014/05/21/priceline-and-expedia-are-googles-two-most-important-advertisers/) Based on that level of ad spend, losing paid traffic to suppliers or other intermediaries has a material impact on ROI, so one can’t blame the OTAs for optimizing conversion. And don’t overlook the focus OTAs & Meta-search players put on SEO to gain top placement in organic search results. Those efforts equal reach well beyond most hotel brands and properties.

3) Google Analytics (and others) has some nifty tools to track shared attribution, but most hotels either do not understand or have structured their websites and owned/shared media assets to advantage of this capability. A variety of modeling methods are supported:
– Last Interaction
– Last Non-Direct Click
– Last AdWords Click
– First Interaction
– Linear
– Time Decay
– Position Based
– Custom

Hoteliers need to a) establish tracking capabilities, b) determine the model that best fits their experience and c) start shifting resource allocations to more efficient and measurable channels. One size does not fit all.

4) 3rd Party cookies are dead and Universal Analytics is the future. Google, Apple, Facebook & Microsoft all have platforms to track a unique UserID. Google’s UA platform not only provides cross-device tracking, but the ability for hoteliers to integrate 1st party proprietary cookie and offline data sources. Attribution analyses will become much better. The good news is that this will provide unparalleled customization and personalization opportunities for hoteliers, with the bad news being that intermediaries will have access to the same tools – at a larger scale. The truly paranoid will start freaking out that Google (or Apple, or Facebook, or Microsoft) will be hosting all this UserID related data.

Cutting off the OTA channel is a silly solution for the vast majority of hoteliers. The key to success will be holistically understanding all segment and channel related costs (including shared attribution, property/brand, online/offline, etc.), at a minimum, from a cost-volume-profit perspective at the Net Operating Income level.

Hotels need to have a sound strategy and execute it well. The solution will not necessarily be creating a macro consumer behavior shift change that will impact acquisition, but smartly focusing on mirco segments and working very hard on guest retention. It is one thing to source new customers that exist beyond a hotel’s marketing horizon through OTAs, but if guests that dwell within that horizon or are repeat guests to the property are loyal to (or at least prefer to book through) OTAs, there will be a lot more significant issues than disliking current margins and contractual terms.

Meta-search is a great option if a hotel can efficiently manage the bidding process and convert. Just remember that OTAs hold the top position in meta-search 78% of the time, up from 68% last year (sorry – proprietary source.)

OTAs & meta-search sites are making smart data-driven business/distribution decisions. It’s time the hotel industry did the same. Relying on the billboard effect – gaining a direct-booking benefit from OTAs failing to convert – isn’t a strategy for long-term success.

Is there anywhere we can see the data behind this analysis? A couple of aspects sound a bit dubious. 1720 bookings over 3 years isn’t statistically significant. And turning a channel on and off completely skews data.

If you want my two cents the main issue is that yes, sometimes (often?) booking direct IS more expensive for users.
I often find hotels doing strange things with their rate-strategy, offering better deals on OTAs.
In a metasearch-driven business like the one we’re living today, users can check multiple offers in just one core-page and they will ALWAYS look for the best deal, no doubt about it.
I found that sometimes hotels are not even aware of that: channel managers of course improved the situation but yes, in 2014 there are still (many) hotels that update their rates manually, doing disasters!
Moreover sometimes hotels decide to increase last second offers or not-refundable % of discount, etc. and they simply forget to do it on their own booking engines too.
Result? Even with the same BAR OTAs have better rate.
I tell you: I found errors like this on a DAILY basis…
And what about B2B rates sold B2C?
Billboard effect is way far from dead IMO, but hotels must always check what’s happening on their distribution strategy, because we’re not in 2012 anymore: TripAdvisor core-page results made it very simple to check the best offer, and Trivago is airing TV-commercials in Italy highlighting the fact that you can get the best deal comparing rates on metasearch.
The funny thing is that you can find the best rate because of some hotel’ distribution error…

Sean O'Neill

Great article. Lets look at this in context. This is not about ADR, LOS or DOW. You cannot look at top line results without analyzing the impact on the bottom line – or Net Operating Income. Many marketers do not dive that deep. I believe in the Billboard effect. But it should be weighted appropriately. A Billboard effect (to me) means how many channels/sites/devices a consumer uses before they book. A real attribution model is still the Holy Grail. From my own experience working with OTA’s was expensive and did nothing to help me win, engage and retain a guest (AKA Customer Life Cycle). Listen to Cindy, Flo, Max, Moe, Chris….all these experts cannot be wrong. The lonely voice is the OTA who are changing their approach by a) tougher contracts and b) more Meta tactics.
I recommend all hotels to perform their own fully loaded channel mix analysis and develop a strategy from there. There is nothing more important that attracting, winning, engaging and retaining customers. Not helping OTA’s be more profitable at your expense..

Sean O'Neill

Thanks for your comment, Bob.

For what it’s worth, I’m hearing that spending on commissions by a set of US hotel groups has recently been rising at twice the pace as total revenue has been rising, according to findings that were presented to members of the Hospitality Asset Managers Association last week but that haven’t yet been published.

Thanks Sean,
Very familiar with the work that HSMAI carry out and have personally been part of a number of those projects.
What this appears to indicate is that It adds more importance to the necessity to understand true channel costs. If commissions are pacing at twice that of revenue then it would indicate an over reliance on OTA’s. It’s an easy “out”. Its a lazy approach.When I last did an analysis we separated OTA’s from Travel Agents, Tour Operators, and other 3rd party intermediaries. We included all channels including property direct, Cres, website etc. then drilled down on the real costs of doing business with each channel. Look at ADR, LOS, DOW by channel, then review Cost per Booking, Cost per Room, then finally look at Cost as a percentage of revenue..all by channel. This will get you closer but still not at an NOI level.

Looking at a rate of $300 and a commission of (say) 25% does not push $225 to the bottom line. Sadly there are some that think this math works.

Martin Soler

That there is a billboard effect is less a theory than a fact. We survey thousands of bookers every year to check how the guests (the ones that booked direct) found the hotel and we definitely find it exists. It’s diminishing year by year (because OTAs are getting better at keeping them) but we’re seeing 15% of March’s direct bookings to our clients coming from guests who first discovered the hotel on an OTA.
We published on Tnooz about this last year: https://www.tnooz.com/article/tripadvisor-shows-boss-top-source-direct-hotel-bookings/

Of course we’ve also worked courageous hoteliers like Peter above who have turned off all OTAs and gone direct. Unfortunately there aren’t enough that can take such a risk and in too many cases it would mean a cut in revenue. On the other hand we are seeing OTAs like Booking.com taking more market share.

The question is really why should a guest book direct? What is it going to do for them? Sympathy with a hotel’s profit margin isn’t going to cut it. It must either save them money, save them time or make their life better. But that’s a whole different subject 🙂

Glenn Wallace

Why would a guest book direct? One difference might be that while the rates are the same, booking directly with the hotel gives them more flexibility in cancel window because it is a post-pay (at hotel checkout) rate, rather than a pre-pay rate. Presumably some consumers like the certainty of pre-pay. But right now metasearch does not do a great job telling you what you get for the rate, it is all about a number. At least the smarter consumers will look at each site and look at the cancel penalties and window. This comparison is becoming more complex as hotels and chains offer discounted pre-paid rates, and OTAs offer more post-pay choices on rooms.

Glenn,
I would suggest that one of the most compelling reason is for the Hotel Loyalty Program, especially for frequent travelers. The chain would have all of my preferences and I can earn points. It would be interesting to see how many real road warriors use an OTA for a hotel they have a loyalty card with. OTA’s are more frequented by “One and Done” travelers, understanding that’s a very large number.

I too used to be in the camp of the billboard but as of Jan 1, 2014 we made the decision to start cutting the cord with some OTA’s and by the data we have been successful.

Expedia use to be the 800 pound gorilla in the space, so you could justify it on that logic alone with out any needed studies.
Call it simple business : Be where you potential customers are.

Then Expedia instead of being a good partner has gone down the path of insane contract land and taking the stand point of WE CONTROL YOU. read the contract in full and you will understand my stance.

Also for the smaller brands like our hotels , negotiating was out of the question for them.

In the end our customers are now much more savy and as time passes with gain that much greater skill at search. Products / Sites that use META search are house hold staple Apps on most people’s phone.

Going back to my ” keep it simple approach “; No study needed, go to where your potential customers are.

Expedia is trying to play in this space, the meta search, they either own all or most of Trivago.

Finally I would hope by now hoteliers are keeping rate parity as a minimum making even meta an act of looking at the same price every where. Though as I pointed out already you have to read the fine details in those contracts as the OTA’s will skim a bit here and there to make it seem cheaper.

My fellow Hoteliers, stop giving your $$ away to high margins. It makes no sense.
Invest in search, invest some time in your Tripadvisor listings and replying.
Invest time in Meta Search
Invest some time in getting your Web Presence in Mobil and on the desktop correct.
Invest time in Social engagement

If you invest some time the long term pay off of what stays in your pocket is much greater than what you are giving to support a BILLBOARD EFFECT THEORY.

Lastly , we are on the WORLD WIDE WEB not a STRAIGHT FREEWAY. Your customers can jump left, right, side-to-side, backwards, forwards , up and down. Multi-Dimensional travel.
Billboards are for those who drive on straight highways…

Sean O'Neill

Great article! If I understood you clearly, the on/off test showed the impact of being on the first page of results, vs. no listing at all. Has anyone researched the impact on the majority of hotels which are not normally and consistently on the first page?